Daniel Kral
@DanielKral1
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Europe macro at @OxfordEconomics . Opinions my own.
Joined February 2013
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Why are the French so done with
@EmmanuelMacron
? Yes, the fiscal deficit is wide and public debt shot up. But that's because the state's fiscal firepower was used to secure the lowest cumulative inflation in the EU, the highest employment growth, and keep very low poverty levels.
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Impressive how Poland's trade balance has gone from a large deficit 20 years ago to a large surplus now - even surpassing Germany.
Exports of goods and services now make up 65% of Poland's GDP, up from 25% in 2000.
Poland is the new export powerhouse of Europe.
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The new pecking order in Europe:
GDP in Q1'23 vs Q4'19
Poland: +11.2%
Nordics: +5.3% (avg)
Italy, Portugal: +3.4% (avg)
Eurozone: +2.5% (+1.6% excl. Ireland)
France: +1.3%
Germany, Spain: ~Flat
UK: -0.5%
Czechia: -0.9%
Interesting that CEE has the best and worst performer...
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🇫🇷: Macron keeps inflation among the lowest in the EU, voters get angry and vote for extremes
🇭🇺: The highest inflation and a collapsing currency, Orbán wins like 158th election in a row with a large majority*
*in totally free and fair elections
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Poland is special. 🚀
Impressive how Poland's trade balance has gone from a large deficit 20 years ago to a large surplus now - even surpassing Germany.
Exports of goods and services now make up 65% of Poland's GDP, up from 25% in 2000.
Poland is the new export powerhouse of Europe.
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Wholesale gas prices in Europe are collapsing (down over 10% today after large falls in previous days) even as Nordstream is under "maintenance" and other pipeline gas flows from Russia continue to be drastically reduced. Russia is no longer the marginal price setter for EU gas.
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There is a new wunder kid on the block: Portugal
Economy growing to the moon, while govt runs a large primary surplus and debt-to-GDP ratio drops to lowest in more than a decade.
Maybe Portugal can devise an adjustment programme for Germany, which is stuck in limbo since 2018.
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German industry has proven a lot more resilient than feared - while gas consumption has collapsed by double digits, industry output has remained largely flat. A remarkable achievement.
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Perhaps most impressively, Poland's booming economy, which has outperformed all others, recorded the smallest current account deficit in the region last year. And this without any EU Recovery Fund transfers 👀
The new pecking order in Europe:
GDP in Q1'23 vs Q4'19
Poland: +11.2%
Nordics: +5.3% (avg)
Italy, Portugal: +3.4% (avg)
Eurozone: +2.5% (+1.6% excl. Ireland)
France: +1.3%
Germany, Spain: ~Flat
UK: -0.5%
Czechia: -0.9%
Interesting that CEE has the best and worst performer...
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All high debt Eurozone economies continue to reduce public debt at a pace exceeding that required by the existing fiscal rules - even France (just about) 😱
Among them, Greece and Portugal stand out - both have fully eliminated the pandemic-era debt surge. Impressive!
Eurozone public debt to GDP again declined in Q3 2022 as high nominal growth offset primary deficits and rising debt servicing costs.
In Italy, the effective interest rate on public debt went up from 2.3% to 2.6%. Higher rates take time to feed through, due to long maturities.
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Poland's large surpluses and growth in services trade stand out, overtaking Czechia and Slovakia (much smaller economies). On top of transport (famous Polish haulage companies) and travel, IT and R&D exports have been booming. Poland is moving up the value chain. 🚀
Perhaps most impressively, Poland's booming economy, which has outperformed all others, recorded the smallest current account deficit in the region last year. And this without any EU Recovery Fund transfers 👀
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It's happening...
Indeed, food price inflation in Europe likely peaked and will gradually head down. Good news for everyone.
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The unfolding debt reduction episodes in Southern Europe are for the history books. The ones in 🇬🇷🇨🇾🇵🇹 are already the fastest on record - and likely soon to be the largest on record.
Historic debt reductions in small South European economies continue. Public debt to GDP ratio in Greece is now the lowest since mid-2012 (debt write-off), and in Portugal since mid-2010, dropping to below 100%. The two have cast off the long shadow of the Eurozone debt crisis.
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The EU has a record amount gas in storages for this time of year, weather is unseasonably mild, and wholesale gas prices are at their lowest since autumn 2021.
Economic forecasts are being upgraded with a good chance Europe will avoid a recession. Russian gas blackmail failed.
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After Slovakia beat USA 4:1 at the
@IIHFHockey
ice hockey world championship yesterday, a grocery chain lowered the price of bread by over 10%, citing the victory. Cynics, who sneer at any (sport) success with 'bread won't be cheaper', have been proven wrong.
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The ongoing correction in Sweden's house prices is one for the history books, down by almost 15% in half a year - already below the bottom of the financial crisis.
And the
@riksbanken
is far from done with the hiking cycle. Fasten seatbelts.
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German industry stands out in the weakness, being the worst performer in the EU. Denmark's industry is pulled single-handedly by the pharma sector (miracle weight-loss drugs) and Poland is simply... Poland 🚀
German deindustrialization in one chart, it’s not only automotive industry that is contracting. What a mess.
Ht
@DanielKral1
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Germany is in search of a new growth model, as the previous growth driver - its industry - has been in secular decline since 2018. German industrial output is now down by over 10% relative to 2010-19 trend. No wonder alarm bells are ringing and subsidies are cooking in Berlin...
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Kremlin-friendly biker gang Night Wolves set up European base near a small village in
#Slovakia
(on estate owned by friend of long-time interior minister Kalinak). Drone photos show armored vehicles and tanks inside. Also alleged training camp for Slovak far-right paramilitaries.
Pokud vám ještě připadá ruský🇷🇺motorkářský gang jako neškodná banda ruských nacionalistů, podívejte se co se děje na jejich slovenské základně v obci Dolná Krupá u Trnavy. Mají tam i tanky. Cvičí se tam Slovenští branci. Toto už není ani zdaleka sranda.
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The greatest mechanism for redistributing incomes within Europe is back in full force - North Europeans holiday in Southern Europe, driving large surpluses on services trade, which are recycled by buying goods from the North. Italy is an exception due to its large industry.
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Fitch just downgraded France's sovereign credit rating.
Italy and Spain: 🫣😱
Make no mistake - austerity is back with or without a reform of EU fiscal rules.
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The
@EU_Commission
will soon propose opening the Excessive Deficit Procedure for several countries. The ones to watch are 🇮🇹🇫🇷🇧🇪🇪🇸, which account for 50% of Eurozone GDP and 65% of outstanding Eurozone public debt. Current politics is not conducive to needed fiscal adjustments...
Bruegel simulations of how much fiscal consolidation will be required to meet reformed EU fiscal rules over 2025-2028 (assumption: no reform extension to 7 years):
🇮🇹: 4.3% of GDP
🇫🇷: France 3.7%
How is this going to work with the Meloni government and current French politics?
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Not immediately obvious here which country has had a debt ceiling. The casual observer would probably have thought it's Germany.
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Historic debt reductions in small South European economies continue. Public debt to GDP ratio in Greece is now the lowest since mid-2012 (debt write-off), and in Portugal since mid-2010, dropping to below 100%. The two have cast off the long shadow of the Eurozone debt crisis.
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Fiscally, 🇮🇹🇫🇷🇧🇪🇪🇸 have the worst of both worlds - high deficits and debts. 🇭🇺🇷🇴🇵🇱🇸🇰🇲🇹 have high deficits but relatively low debts.
Positively, most EU countries are outside the Excessive Deficit Procedure danger zone, even if some still require to consolidate public finances.
The
@EU_Commission
will soon propose opening the Excessive Deficit Procedure for several countries. The ones to watch are 🇮🇹🇫🇷🇧🇪🇪🇸, which account for 50% of Eurozone GDP and 65% of outstanding Eurozone public debt. Current politics is not conducive to needed fiscal adjustments...
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Croatia stealing Poland's thunder to be the best performing European economy since the pandemic - saving € honour in the process (yes, Croatia only joined in Jan this year, but the waiting room in the run-up is like being a member without a vote).
More below ⬇️
Since the pandemic, CEE economies tended to have the strongest GDP growth and consumption (despite largest exposure to Russia & highest inflation); Nordics strong growth but weak consumption; major West European economies weak both GDP and consumption; and mixed in South Europe.
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Better indicator than GDP per capita on standards of living 🔽
Remarkable East-West convergence over time with 🇷🇴 as the clear growth champion. 🇮🇪 closer to richer CEE countries than to West Europe (forget GDP).
But also very visible scars of the 2008-10 crisis in South Europe.
In 2023, in the EU, actual individual consumption per capita (in purchasing power standards) was highest in:
🇱🇺Luxembourg (38% above EU average)
🇦🇹Austria & the 🇳🇱Netherlands (17% above)
Lowest:
🇭🇺Hungary (30% below EU average)
🇧🇬Bulgaria (27% below)
👉
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Until recently, some EU member states produced as much natural gas as they consumed or even more. Now only Romania does, the EU's largest gas producer in absolute terms (overtook the Netherlands this year). The EU went from producing over 30% of its gas demand in 2010 to 10% now.
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And Germany is back to running large current account surpluses with the rest of the world.
The EU is back to running a large trade surplus (exports > imports).
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Impressive public debt reductions in small South European economies (🇬🇷🇨🇾🇵🇹🇭🇷), driven by fiscal consolidation and solid nominal growth, have continued. The highest increases in the public debt ratio (also been flat last few quarters) was in France. No surprises there.
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The latest growth pecking order in Europe, including UK's recent large upward revision. South-East Europe on top, Denmark's Novo Nordisk single-handedly preventing a recession in H1 this year. Czechia as only economy not to have recovered pre-pandemic level of output even by Q2.
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Italy is now the best performing large European economy, a large contrast to the 2010s. But growth has been driven by the wasteful "Superbonus" scheme, which turbocharged construction investment and exploded the govt deficit. Without it, Italy would be among the worst performers.
Broad upturn across advanced economies in Q1 2024 confirmed in the latest estimates with Sweden revised up (Denmark an exception due to pharma sector swings). The long stagnation is likely over with inflation around target, elevated income growth, and improving confidence.
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Alternative way of presenting this 🤔
We'll have lots of revisions to recent GDP data (and Q1 data for those that haven't published "flash" releases) in the coming days - today's downward revision for Germany knocked it down to where the UK is, bottom of the European growth league.
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Among those already reporting Q3 GDP, Poland's economy is back on top after a large upward revision to Q2 and a bumper Q3 (Croatia still to report, but was up 14% already by Q2). However, these are flash estimates, so rankings will change.
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European wholesale gas prices are a whisker away from their historic range, while at the current rate EU gas storages will be almost 100% full by the end of September. Once again reminded that Russia is good at sprints, but Europe at marathons.
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The return of France as a major net electricity exporter this year (due to more of its nuclear capacity coming online and lower demand) has been the key development in European energy markets this year.
Spectacular flip in the France-Germany price spread in September
Improved nuclear availability & low winds did the trick.
let's see what October weather has in store, first two weeks look pretty similar to september, but after ?
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@Noahpinion
Chernobyl aside (an accident), the Soviet planned economy in USSR and Eastern Europe damaged the environment on an unprecedented scale. Few realize just how incredibly dirty and destructive the model was for nature.
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Eurozone's latest member, Croatia, is another South European recent economic success story. GDP is up by 10% compared to Q4 2019 and the pre-covid trend (real goods exports are up 60%!), government posted a budget surplus and public debt has been on a rapid decline. Impressive!
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Is it time for a debate whether the German economy is strong enough to be in a currency union with the likes of Greece? What a turnaround compared to the last crisis...
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What a difference the EU Recovery Fund makes - unlike in the aftermath of the global financial crisis, fixed investment is expected to be a major growth driver in Southern Europe.
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There is no end in sight for the weakness in German industry, which has become more broad-based in Q3. Hard to pick out any positives.
German industrial production now a staggering 17% below the trend from 2010s, meaning over a hundred billion Euros in lost output.
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No, France is not facing an imminent debt crisis. The central bank holds over 25% of public debt and govt financing costs remain historically low. But markets will keep a higher risk premium due to policy uncertainty, and a collision with the EU over fiscal path looks inevitable.
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Orban may soon find out what happens to those who throw rocks from a glass house. With the worst inflation in EU (food prices up 60% since Jan'21), HUF FX rate resembling an African currency, jump in borrowing costs, and 75% of HU exports going to EU, he still acts tough with EU.
💥SCOOP - Brussels has drawn up a plan to sabotage Hungary’s economy if Viktor Orbán blocks a €50bn aid package to Ukraine this week, according to a secret internal document seen by
@FT
that lays out Budapest’s economic weaknesses & how to exploit them 🧵
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Italy stands out in its recent construction boom, driven by a government subsidy scheme (which also blew up the budget deficit). Meanwhile, the auto sector's secular decline is evident across Europe.
Also interesting how France has become the innovation champion in Europe.
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Poland boasts a large domestic market, a diversified export base and low reliance on natural gas (coal is another issue). As a result, it has recently outgrown all regional peers while the current account returned to balance (despite a still large fiscal deficit). Impressive! 🇵🇱
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Despite all the doom and gloom about its apparent economic decline, Germany is back to running large external surpluses (almost on a par with the average for 2010s) after a temporary drop in 2022 caused by surging prices for imported energy.
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Germany's industry continued its broad-based decline in November with output now almost 15% below its pre-pandemic peak (more than €100bln in lost output in real terms). And now interest-rate sensitive construction is falling off a cliff, too.
Die reale (preisbereinigte)
#Produktion
im Produzierenden Gewerbe ist im November 2023 gegenüber Oktober 2023 voraussichtlich um 0,7 % gesunken. Damit war die Produktion den sechsten Monat in Folge rückläufig. Mehr Infos in der Pressemitteilung:
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The long shadow of the global financial crisis in Spain (and other Southern European economies) illustrates the long and painful nature of adjustments after the build-up of large external imbalances, which are characterized by a profound misallocation of capital and labour.
Spain's employment is up 5.5% since Q4 2019, based on the most comprehensive measure. It has now matched the peak from just before the financial crisis (as did Greece and Portugal), but this time without a large misallocation of labour and severe external imbalances.
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Maybe if the UK had joined the Euro, the government's debt servicing costs wouldn't have skyrocketed so much recently and there would be more money for public services.
Italy govt's debt-to-GDP ratio is 50% bigger than the UK's but both now spend the same on interest payments.
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We'll have lots of revisions to recent GDP data (and Q1 data for those that haven't published "flash" releases) in the coming days - today's downward revision for Germany knocked it down to where the UK is, bottom of the European growth league.
The new pecking order in Europe:
GDP in Q1'23 vs Q4'19
Poland: +11.2%
Nordics: +5.3% (avg)
Italy, Portugal: +3.4% (avg)
Eurozone: +2.5% (+1.6% excl. Ireland)
France: +1.3%
Germany, Spain: ~Flat
UK: -0.5%
Czechia: -0.9%
Interesting that CEE has the best and worst performer...
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@daniel_freund
He has a large map with it hanging in his office. Luckily Hungary's economy is an error and omission on the EU level, currency is a joke, and country is totally corrupt. So mostly for domestic signalling purposes.
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Despite Poland growing remarkably, living standards in Poland and Japan are not at the same level, as Polish households have been large net borrowers to sustain their consumption, while Japanese households have been large net lenders, consuming well below their means.
Interesting to note that living standards in Poland and in Japan are now at basically the same level. In 2000, the figure was three times higher for Japan than for Poland.
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Impressive that 80% of Polish companies say they employ Ukrainians and in a third of companies, they make up 10-20% of workforce. Given Poland's persistent labour shortages, the additional labour supply is boosting growth (already strongest in Europe).
The new pecking order in Europe:
GDP in Q1'23 vs Q4'19
Poland: +11.2%
Nordics: +5.3% (avg)
Italy, Portugal: +3.4% (avg)
Eurozone: +2.5% (+1.6% excl. Ireland)
France: +1.3%
Germany, Spain: ~Flat
UK: -0.5%
Czechia: -0.9%
Interesting that CEE has the best and worst performer...
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On average, Eurozone governments still spend less than 4% of their total revenues on debt interest payments. Twenty years ago it was double that. Italy's average for 2010s was 10%, now at 8.6%. Puts public debt sustainability alarmism on this website into perspective.
Interest payments on government debt have increased substantially in the €zone compared to the Covid low; strongest rise for Italy, Greece, Spain, Portugal.
chart via
@DanielKral1
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No obvious link between govt spending on family benefits & fertility rates. Some spend a lot but have low fertility rates (Poland, Finland), others spend relatively little but have them high (Czechia, Romania). South Europe has both small; Sweden and Denmark both relatively high.
Family benefits represented 8.3% of the total spending on social protection benefits in the EU in 2021.👪
Highest shares in:
🇵🇱Poland (15%)
🇱🇺Luxembourg (14.8%)
🇪🇪Estonia (12.8%)
Lowest:
🇮🇹Italy (4.1%)
🇳🇱The Netherlands (4.6%)
🇨🇾Cyprus (4.7%)
👉
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EU wholesale gas prices dipped below 30 EUR/MWh, a level last seen in June 2021. Beyond the wildest hopes only a few months ago!
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Of the 10 best performing European economies since just before Covid, 8 are in Southern or Central-Eastern Europe (Croatia is just 🚀). The EU convergence machine marches on.
And after the latest downward revisions to Finland's GDP, Czechia is no longer alone in its misery.
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The UK economy has outperformed France and Germany since the pandemic and, based on today's PMIs, is currently doing much better as well (composite PMI consistent with growth in Q4 versus a contraction in GER and FRA).
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Thinking about how Denmark's government ran a budget surplus during a global pandemic, while the economy suffered a relatively shallow recession and has had one of the strongest recoveries in Western Europe in the aftermath...
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The EU economy just got a huge tailwind as wholesale gas prices have plummeted (gas also sets electricity prices).
The EU's near-complete weaning off from Russian gas means gas market now driven by supply/demand, not a geopolitical risk premium. Russia's gas blackmail is over.
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Only three governments in the eurozone plan to meaningfully lower their debt-to-GDP ratios in the coming years - Spain, Greece, and Portugal.
How times have changed, only the lecturing comes from the same places...
Correct, they moved to the southwest side of the union in a country blessed by the Atlantic sea & marvellous countryside
Portugal expected to achieve 2nd consecutive budget surplus in 2024 bringing the public debt-to-GDP ratio below 100% after peaking at 135% in 2020
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The last time credit flow in the Eurozone was like this, the economy was in a real bad shape...
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The Polish export miracle - diversified and steadily growing, driving large surpluses on foreign trade. And with evidence of moving up the value chain, with a growing surplus in ICT and Telecom services. 🇵🇱🚀
Poland boasts a large domestic market, a diversified export base and low reliance on natural gas (coal is another issue). As a result, it has recently outgrown all regional peers while the current account returned to balance (despite a still large fiscal deficit). Impressive! 🇵🇱
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Latest growth rankings in Europe: large headwinds affect all, but recent growth performance diverged significantly. Poland booming, while neighbouring Czechia sinking into an ever deeper hole. Overall, smaller economies - North and South - tended to beat large ones since 2019.
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There is an outlier in the stagnant Eurozone - Croatia has continued to grow strongly despite the powerful macro headwinds of recent years. Worth watching, a new Balkan tiger in the making? 🇭🇷🇭🇷
The great Eurozone stagnation - GDP has been flat for two years. Details for Q4 GDP out today show not much action in underlying components either. Those
@ecb
rate cuts and recovery in demand cannot come soon enough.
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The global financial crisis broke the relationship between the growth of the economy and public debt for major EU economies. The only exception is Germany.
Italy's growth problem does not stand out; only its already high debt stock pre-2008. The one which stands out is Spain.
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At this point, Greece is doing its own thing 🚀
Impressive public debt reductions in small South European economies (🇬🇷🇨🇾🇵🇹🇭🇷), driven by fiscal consolidation and solid nominal growth, have continued. The highest increases in the public debt ratio (also been flat last few quarters) was in France. No surprises there.
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If there was any doubt about where the future of climate change will be decided and what has been the direction of travel over the last few years.
BREAKING: The UN weather agency has issued a 'red alert' on climate change after 2023 temperatures broke records 'by a clear margin'.
📺 Sky 501
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@ojblanchard1
There is also the option that RN surprises on the upside when governing and wins big in 2027
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Since 2015, the US has outgrown the Eurozone (19% vs 12%). But over this period, the federal budget deficit averaged 6.3% of GDP in the US and just 2.7% of GDP in the Eurozone. The US growth outperformance cannot be separated from its much wider fiscal deficits.
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Germany is firmly on course of relative decline, as all major Eurozone economies are expected to grow faster in the coming years. Germany's decisive voice in the EU's macro governance framework has been based on its strong economy. No longer...
Germany is in search of a new growth model, as the previous growth driver - its industry - has been in secular decline since 2018. German industrial output is now down by over 10% relative to 2010-19 trend. No wonder alarm bells are ringing and subsidies are cooking in Berlin...
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The fact that Malta, Ireland, and Cyprus are so high up tells us that this ranking of household wealth is pretty useless. These island havens do store a lot of wealth but it doesn't belong to their households.
Why are Germans so angry?
Here's one answer: Germany is rich but Germans are poor.
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Only two countries have significantly expanded goods trade surpluses versus 2019, despite higher costs of imported energy: Poland and Denmark. Surpluses on services trade have tended to grow in small South European economies, driving their growth outperformance.
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How has Greece lowered public debt at record pace?
- Primary balance swung from a deficit of 10% of GDP to a 2% surplus in 2 years (took 6 years after 2010)
- Strong real growth was the main driver overall
- Most recently, inflation has outpaced growth
...and it's not over yet!
Impressive public debt reductions in small South European economies (🇬🇷🇨🇾🇵🇹🇭🇷), driven by fiscal consolidation and solid nominal growth, have continued. The highest increases in the public debt ratio (also been flat last few quarters) was in France. No surprises there.
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Moreover, the ECB became a net seller of Italian, Portuguese, and Greek govt debt. Not only was there no crisis, but their spreads vs bunds narrowed, fiscal deficits improved, and debt-to-GDP ratios declined. Almost as if some people on this website just make up alarmist crap.
The ECB has turned itself into a net seller of €zone government bonds in the second half of 2022, after being a big net buyer during the Covid-19 crisis years.
chart via
@DanielKral1
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Macron has a point, we are no longer dealing with the China of the 2010s whose high growth and stimulus soaked in the EU's exports. Today's China is one of overcapacity and import substitution. The EU's automotive industry is undergoing a China shock, leading to trade tensions.
Macron laments Europe's de-industrialization in favor of offshoring to China, and kicks German carmakers which he says are acting against European/German interests for the sake of short-term profits
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Important to add - Denmark generates most of its electricity from wind and solar. But it is hugely reliant on imports when it's not windy or sunny - during some summer months, it imported more than it generated. Obviously, we can't all do that and keep the lights on.
Share of electricity from solar and wind ☀️💨
[a mix of countries – not a top X rankings]
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93
345
9
43
153
Most large Eurozone economies stagnated since early 2022 (energy crisis, inflation, interest rates). But not Spain, which has continued to grow at an impressive rate - from falling the most during covid (tourism / services sensitive economy) to becoming the best performer.
7
51
152
Eurozone is not heading for a sovereign debt crisis. Debt servicing costs rise only very slowly due to long debt maturities; inflation and tight labour markets boost govt tax intake.
Greece and Portugal have high debts but spend just 4.5% of govt revenues on interest payments.
11
45
147
Public debt to GDP ratios are lower than just before the pandemic in five Eurozone economies. A lazy assumption is that this is due to inflation - not true. Post-pandemic growth rebounds have been more important in 🇬🇷🇨🇾🇵🇹🇭🇷. Only in 🇳🇱 was inflation the main driver.
Historic debt reductions in small South European economies continue. Public debt to GDP ratio in Greece is now the lowest since mid-2012 (debt write-off), and in Portugal since mid-2010, dropping to below 100%. The two have cast off the long shadow of the Eurozone debt crisis.
9
132
322
8
55
147
The ECB has become a (small) net seller of eurozone government debt in H2 2022, while the spread between German and Italian govt bond yields has during that time... narrowed. Shockingly, Italy may be able to finance itself even as the ECB formally exits the market.
Eurozone is not heading for a sovereign debt crisis. Debt servicing costs rise only very slowly due to long debt maturities; inflation and tight labour markets boost govt tax intake.
Greece and Portugal have high debts but spend just 4.5% of govt revenues on interest payments.
11
45
147
14
35
141
The EU is back to running a large trade surplus - but not with China where the deficit is much wider than in 2010s. From Europe, China is no longer seen as a growth market to capture but a threat to domestic producers / industry to protect against. EU policies will reflect this.
When looking at the EU trade balance by product group in Q1 2024, the largest surplus was recorded for:
🔸 Machinery and vehicles (€65.7 billion)
Largest deficit for:
🔸Energy (-€87.7 billion)
Learn more 👉
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28
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Big debate about how positive growth / fiscal numbers for Portugal and Greece obscure the hard reality of life there.
Newsflash: It's not milk and honey anywhere. Point is that recoveries in Greece and Portugal have been spectacular, while Germany lags. Opposite of the 2010s.
There is a new wunder kid on the block: Portugal
Economy growing to the moon, while govt runs a large primary surplus and debt-to-GDP ratio drops to lowest in more than a decade.
Maybe Portugal can devise an adjustment programme for Germany, which is stuck in limbo since 2018.
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37
141
More economies reporting Q1 growth numbers: 🇺🇸 growth (accompanied by eye-watering fiscal deficits) since just before the pandemic on a par with EU CEE economies, which top the ranking (convergence continues); large European economies lagging; and 🇨🇿 is again alone in its misery.
7
41
139
Now official: the EU has finished this heating season with record levels of gas in storages for the second year in a row - beating even the pandemic year 2020 when energy consumption tanked. Will this be the new normal?
10
48
139
The fact that last year almost 20% of electricity was solar generated in the Netherlands (on a par with Greece), even though the sun in the Netherlands is largely understood to be a mythical shiny thing up in the sky other countries enjoy, is really quite remarkable.
7
38
134
European wholesale gas prices continue to plummet, benchmark now trading at ~50€/MWh (lowest since Sep'21).
Latest assumptions for 2023
@ecb
: 124€/MWh (December)
@EU_Commission
: 63€/MWh (today)
The ECB's gas and inflation forecasts will come down in March, maybe by a lot.
4
56
132
EU Beveridge curve shows Germany, Netherlands, Czechia have low unemployment rates and high job vacancy rates; Spain and Greece have high unemployment and low vacancy rates. Poland stands out again with a low unemployment and job vacancy rate, implying an efficient labour market.
3
34
132
Longer-term industry trends show a different picture - in Western Europe, Germany and Austria have had the strongest growth with Denmark being a laggard; In CEE, while still impressive, Poland is not the first; while South Europe has never recovered pre-financial crisis peaks.
German industry stands out in the weakness, being the worst performer in the EU. Denmark's industry is pulled single-handedly by the pharma sector (miracle weight-loss drugs) and Poland is simply... Poland 🚀
19
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6
45
125
Adding to the crisis, German electricity generation is down by 11% this year. In contrast, French electricity generation is up almost 10% thanks to the nuclear ramp-up.
France generated more electricity YTD than Germany (385 vs 365 TWh) despite its economy being ~40% smaller.
There is no end in sight for the weakness in German industry, which has become more broad-based in Q3. Hard to pick out any positives.
German industrial production now a staggering 17% below the trend from 2010s, meaning over a hundred billion Euros in lost output.
19
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One of my all-time favourite charts - shows how uncertain forecasting is even if you have an army of economists and just one thing to forecast.
The fact that inflation recently took everyone by surprise is nothing new, only that this time it has surprised to the upside.
5
30
125
Austerity is coming to the UK, difficult choices ahead... The share of revenues that the UK government spends on debt servicing costs doubled to 12% in just two years, far above any Eurozone country.
Fitch just downgraded France's sovereign credit rating.
Italy and Spain: 🫣😱
Make no mistake - austerity is back with or without a reform of EU fiscal rules.
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In most Eurozone economies, inflation has not been high enough to lower public debt to GDP ratios versus just before the pandemic because of no growth (🇩🇪🇫🇮🇪🇪) or high primary deficits (🇫🇷🇮🇹🇪🇸🇧🇪🇸🇰). Only in 🇬🇷🇵🇹🇨🇾🇮🇪🇳🇱 did nominal growth outweigh deficits and interest payments.
1
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EU governments have been submitting their multi-year fiscal plans to
@EU_Commission
, signalling where they stand in the debate on the reform of EU fiscal rules.
The only govt that's signalling compliance with the existing requirement to lower the debt-to-GDP ratio each year by
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39
120
Putting the scale of the distortion into perspective - while fixed investment is far below pre-covid trend across other large economies, it has boomed far above it in Italy, driven by construction. This is the Superbonus effect. But what happens when the scheme ends...
Italy's Q4 GDP was once again driven by construction, residential investment in particular, due to the Superbonus scheme, which has blown up the budget deficit. Italy has outperformed other large economies since Q4 2019 but only thanks to this subsidy-induced (and wasteful) boom.
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21
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We need to get used to a world where Portugal and Greece are the leaders in fiscal consolidation and prudent fiscal management and Germany is a laggard. At least France is a beacon of stability, although not in a good way...
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